The American health care industry continues to navigate the aftershocks of the acute phase of the COVID-19 pandemic. According to a recent report published by the American Hospital Association (AHA), increasing supply, labor and administrative costs to hospitals continue to outpace increases in reimbursement rates by government payers. (See "Hospitals and Health Systems Continue to Face Rising Costs, Economic Pressures," American Hospital Association, May 2, 2024.) While hospitals have achieved some stabilization in the past year, the same report highlights the continuing challenges faced by the industry, including the ability to meet the demand for care, increased compliance requirements, investments in updated technology, including adding in protections against the ever-increasing slate of cyberattacks, as well as infrastructure improvements to prepare for the next health care crisis.

These pressures have led to a slower pace of hospital mergers and acquisitions than seen in pre-COVID years, with health systems focusing on streamlining operations and choosing partnerships or sales agreements in some instances to ensure they are able to continue to serve their communities. When considering such a merger, performing thorough due diligence is more important than ever before to safeguard any potential financial or regulatory risks. When reviewing the financial records of a potential acquisition, the acquiring party should determine whether there are any loans that would need to be satisfied prior to the acquisition. If the loans may be assigned to the acquiring party, the acquiring party will need to carefully review the terms of the loan to better understand when payments are due and then review the current and projected revenues of the facility to ensure that the revenues will cover the loan payments.